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Will Dollar Decline End Luxury Goods Comeback?

Sales growth has accelerated over the past three quarters at Italian fashion brand Salvatore Ferragamo, signalling an improvement in the crisis-hit luxury goods market, but currency movements and a shaky economy pose a major concern for 2011, the group’s CEO told CNBC on Thursday.

Click here to watch the full interview with Michele Norsa

“The third quarter … was stronger than the second quarter, and the second was stronger than the first quarter, so we are on a positive trend,” CEO Michele Norsa said.

“When we look at 2011, it becomes difficult to make predictions and the concern about the financial world and the exchange rate remains high," he said.

"But the reaction in the past weeks and days has not been negative. People still feel more confident probably than the economists and the politicians.”

LVMH , the world's biggest luxury group, beat forecasts on Thursday with a 14 percent rise in comparable third-quarter sales, driven by the solid recovery of its fashion, wines and champagne businesses.

The figures confirmed the industry's stronger-than-expected rebound, powered in part by expansion in China.

“There was also a change in the pace of the consumer … they are looking for a product which can last two or three years, not two or three seasons, so they buy smartly. They try to buy something where they find more value,” Norsa said.

“Chinese don’t know more than five or six brands, so for them it’s natural to buy with the top brands,” he added.

German fashion house Hugo Boss, known for its sharply-cut men's suits, also posted better-than-expected third-quarter figures on Thursday and raised its 2010 profit forecast.

But Ferragamo remains cautious, aware that a weak US dollar could pressure the business as costs rise.

“Definitely the weakness of the US dollar is a big challenge … and for companies like us which manufacture 100 percent in Italy and so have all of the costs - except for distribution - in euro, that is a major concern,” Norsa said.

The United States remains a very important market for the Italian brand, not least because of its image, he said.

“New York is the capital of everything, so it is very important for us to be able to support the market and be able to grow in the United States, open new stores,” he added.

“And even looking at 2011, probably the market which seems more at risk is the United States.”